In addition, the proposed new limit on total premium?which is $1.89 million, up from the current $1.2 million?would be indexed for inflation.

The change is contained in broader tax and trade legislation. David Winston, senior vice president with the Indianapolis-based NAMIC, noted that the same provision also appears in the House version of the legislation, which is still pending.

He said that if the House does approve the legislation, which is still problematic at this writing, there is a good chance that the tax reform NAMIC seeks will be in a final bill.

"NAMIC is very pleased with this development," Mr. Winston said. "It is the result of a lobbying both in Washington and at the grass roots level."

He noted that there has been a lot of consolidation among farm mutual companies, and many consolidated companies are coming up against the current $1.2 million limit.

These companies, Mr. Winston said, will be adversely affected without an increase. He added that the current $1.2 million limit has been in effect since 1986.

The legislation advanced by the Senate also contains a modest change in the tax exemption rules relating to small p-c companies recently enacted into law.

Under the new law, a small p-c company is tax exempt if its gross receipts do not exceed $600,000 and more than 50 percent of its receipts are from insurance premiums.

The Senate bill would require that a p-c company derive more than 60 percent of its gross receipts from insurance premiums to claim the tax exemption. The move to change the exemption followed disclosure that some wealthy individuals were using the format to shelter income.